Australian explorers are valued at a median of 11 times their reserves, a 23% discount to their counterparts that are listed on stock exchanges in North America, according to data compiled by Bloomberg.
The valuation gap — driven by Australian investors who are more than 8000 miles (12,800 kilometers) from the companies’ wells in Texas and Oklahoma — may lure acquirers, according to RBS Morgans.
Antares Energy is among potential targets, with its Southern Star field in the Permian Basin in Texas worth more than twice the company’s $130 million market capitalisation on the Australian stock exchange, estimates Hartleys.
Adelaide-based Sundance Energy Australia, which last month agreed to sell a North Dakota asset for more than the company’s market value at the time, could lure bidders with its remaining acreage that is worth at least five times more than what is reflected in the share price, said Bell Potter Securities.
“I expect many more transactions involving Australian players and the huge number of US and international players currently looking to open up and exploit shale gas and shale oil,” Ben Griffiths, who helps oversees $1 billion in assets for Sydney-based Eley Griffiths Group, told Bloomberg. “The area is a hive of activity and that’s not going to lessen.”
Melbourne-based Molopo Energy and Perth-based Red Fork Energy, are also potential targets, he told the news wire.
Molopo is not in any takeover discussions, chief executive Tim Granger told Bloomberg.
He said Molopo is undervalued, partly because of a lack of understanding among Australian investors about the company’s Wolfcamp project in Texas.
Antares has been approached by suitors interested in its Permian Basin projects and will consider bids that reflect valuations paid for similar assets, chief executive James Cruickshank told the news wire. Antares, based in Perth, is also considering listing shares in the US, he said.
Formerly known as Amity Oil, Antares changed its name and shifted its focus to the US in 2004, after scrapping its Whicher Range gas project in Australia and cutting reserves in Turkey. The company invested in the Permian Basin in 2011.
“Antares is definitely a candidate for transactional activity on a corporate and an asset basis,” Dave Wall, an analyst at Perth-based Hartleys, told Bloomberg.
“Investors in Australia don’t have a deep understanding of the Permian. In Canada, it would be trading with a much higher market cap.”
Antares’s market value on Thursday was A$124.6 million ($130 million).
Wall pointed to BreitBurn Energy Partners’ purchase of oil and gas properties next to Antares’s Southern Star field. Los Angeles-based BreitBurn paid $220 million for 9.5 million barrels of oil equivalent of estimated proved reserves, according to a statement. Based on that price, Southern Star could fetch as much as $294 million, Wall said.
Sundance last month said it would receive $172 million for a stake in North Dakota’s Williston basin from Denver-based QEP Resources. Sundance, which had a market value of about $162 million at the sale’s announcement, leapt 38% in one day.
Even after selling the Williston basin acreage, Sundance’s concentration on areas rich in so-called natural-gas liquids such as propane may appeal to potential buyers, said Johan Hedstrom, an analyst at Bell Potter.
“US companies are quite active in the shale space, particularly in assets with a liquids focus, and that’s what Sundance has,” Hedstrom told Bloomberg. “That makes them a standout.”
ExxonMobil, the world’s largest energy company by market value, last week said it will pay about $2 billion for Bakken shale assets in North Dakota and Montana. Anglo-Dutch supermajor Shell this month agreed to buy oil and gas fields in the Permian Basin for $1.9 billion from Chesapeake Energy, paying about $3,131 an acre, data compiled by Bloomberg show.
“The oil shale assets are certainly being looked at by companies that need long-term reserves,” said Krista Walter, a Sydney-based energy, oil and gas analyst at RBS Morgans. “Asset sales are common but company takeovers can happen as well.”